After seven years of unprecedented strength, the U.S. economy is floundering as the mortgage crisis and gas prices force businesses, small and large, to slash jobs.
It is a given that President Bush presided over one of the strongest economic periods in history, with staggering job creation of 2.6 million jobs, record minority home ownership and a market flush with investment. But in just six months, the stock market has dipped below 11,000 for the first time in two years, nearly a half million jobs have been lost in the construction industry since last year - equal to the losses in all other sectors since December - and mortgage foreclosures are now at record highs.
The first quarter jobs report released in March was the first hint of trouble. Employers nationwide slashed 85,000 jobs during the first quarter and unemployment rose from 4.6 percent to 4.8 percent. By the end of the second quarter, marked by the Fourth of July weekend, the cutting didn’t stop. It was longer and deeper with a total of 438,000 people out of work, mostly in the manufacturing, construction, retail and temporary employment sectors - 62,000 jobs cut in June alone. And as reported by Patrice Hill of The Washington Times, “this came after a spurt of strength in consumer spending spurred by tax rebates.” The unemployment rate is now at 5.5 percent.
The picture is not as bleak as it appears. A good number of these jobs were unfilled and simply eliminated. Some industries like the retail sector that was losing 35,000 a month only lost 8,000 last month. But going forward, Congress just extended unemployment benefits for 3.5 million workers, foreclosures jumped another 53 percent in June, and the next phase of the minimum wage increase passed in 2006 goes into effect July 24, making it just a little harder for small businesses to hire new workers. It is also possible that the prices on necessary goods could rise by 4 percent this year, as opposed to the 2.3 percent economists expected. To top it all off, President Bush is considering a government take over - more precisely a bailout - of the giant, government-sponsored-mortgage companies Fannie Mae and Freddie Mac to the tune of about $5 trillion to $6 trillion.
There is a reason Phil Gramm‘s comments about the recession being a state of mind got so much attention in the press - hundreds of print journalists are a part of these cuts. These are real jobs and many of them were paying good wages.
It could be that 50 percent of this “recession” fear is 90 percent mental. But, despite what Mr. Gramm thinks, this is not a “mental recession” - at least not 100 percent of it.